WASHINGTON, D.C. - Deputy Attorney General Larry Thompson, Assistant
Attorney General Michael Chertoff of the Criminal Division, U.S. Attorney
Alice H. Martin of the Northern District of Alabama, and Carmen S. Adams,
Special Agent in Charge of the FBI's Birmingham Field Office, announced today
that former HealthSouth Corp. Chief Financial Officer Michael Martin has been
charged with conspiracy to commit wire fraud and securities fraud, and
falsifying financial information.

Michael Martin, 42, of Birmingham, Alabama, was charged in a three-count
criminal information filed at U.S. District Court in Birmingham this morning.
Martin is expected to plead guilty to all counts in the information at a
hearing at 2 p.m. CT, and has agreed to cooperate with the government's
ongoing investigation into HealthSouth's finances.

Martin served in various capacities in HealthSouth's accounting department
from 1989 until October 1997, when he was promoted to chief financial officer.
He served as CFO until about February 2000, when he left HealthSouth's
employment.

Count 1 of the information alleges that a conspiracy existed from at least as
early as 1997 until he left HealthSouth's employment, between Martin and
senior officers, to devise a scheme to artificially inflate HealthSouth's
publicly reported earnings and falsify reports of HealthSouth's financial
condition. Martin, as CFO, William T. Owens, who was then controller of
HealthSouth, and others would provide the chief executive officer with monthly
and quarterly preliminary reports showing HealthSouth's actual financial
results. After reviewing these reports, the CEO would direct Martin and Owens
to find ways to ensure that HealthSouth's "earnings per share" number met or
exceeded Wall Street analyst expectations. These instructions were passed on
to members of HealthSouth's accounting staff.

After the senior officers issued instructions as to the desired earnings per
share number, HealthSouth's accounting staff would meet to discuss ways to
artificially inflate HealthSouth's earnings to meet the CEO's desired earnings
numbers. These meetings were known as "family" meetings, and the attendees
were known as the "family." At the meetings, they would discuss ways by which
members of the accounting staff would falsify HealthSouth's books to fill the
"gap" or "hole" and meet desired earnings. The fraudulent postings used to
fill the "hole" were referred to as the "dirt."

According to the information, Martin and others made and caused to be made
false and fraudulent entries in HealthSouth's books and records for the
purpose of artificially inflating HealthSouth's earnings. Methods included
manipulating the "contractual adjustment" or other expense accounts to
artificially inflate revenue on the income statement; and making false and
fraudulent entries into accounts on the balance sheet concerning Property,
Plant and Equipment (PP&E), cash, inventory and intangible asset or goodwill.
HealthSouth's accounting personnel designed the fictitious accounting entries
to avoid detection.

The criminal information alleges that, as a result of the scheme, Martin,
other senior officers and their co-conspirators made and caused to be made
false and fraudulent journal entries in HealthSouth's books and records,
knowing these would be reflected in the financial statements and public
filings with the Securities and Exchange Commission. It was further part of
the conspiracy that Martin, the senior officers and others caused HealthSouth
to file publicly with the SEC annual reports and quarterly reports that
materially misstated HealthSouth's net income, revenue, earnings per share,
assets and liabilities during the period of Martin's involvement in the
conspiracy.

In furtherance of the conspiracy, the information charges that Martin signed
HealthSouth's 10-K for 1997 and 1998, and HealthSouth's 10-Q for the first,
second and third quarters of 1998 and for the first, second and third quarters
of 1999, knowing that each filing did not fairly present the financial
condition and results of operations of HealthSouth. Martin also caused the
third quarter 1999 10-Q to be transmitted by wire from Birmingham to the SEC
in Washington, D.C.

According to the information, the purpose of the conspiracy was for Martin
and others to fraudulently enrich themselves by artificially inflating
HealthSouth's publicly reported earnings and financial condition.

Count 2 of the information charges Martin with falsifying HealthSouth's
financials for the purpose of generating false reports to be filed with the
SEC, in violation of 15 USC Section 78m(b)(2)(A), 78m (b)(5) and 78ff, 17 CFR
Section 240.13b2-1, and 18 USC Section 2. The third count of the information
seeks forfeiture to the United States of any property which constitutes or was
derived from proceeds traceable to these securities violations by Martin.

"Mr. Martin's plea demonstrates you cannot leave a corporate fraud conspiracy
by simply walking out the corporation's front door. Today he accepts criminal
responsibility for actions which began in 1997 and ended more than three years
ago," said U.S. Attorney Alice Martin. "He is cooperating with our
investigation and helping supply additional information."

HealthSouth was organized under the laws of the state of Delaware, with
headquarters in Birmingham. HealthSouth claims to be the nation's largest
provider of outpatient surgery, diagnostic and imaging and rehabilitative
healthcare services, with approximately 1,800 facilities in all 50 states,
Puerto Rico, the United Kingdom, Australia and Canada. The company employs
more than 51,000 workers, and was founded in 1984.

Martin is the ninth person to be charged in connection with the HealthSouth
investigation, which began last month. Last week, five HealthSouth officers
were charged in connection with accounting fraud, including Chief Information
Officer Kenneth Livesay. Earlier in the week, HealthSouth Vice President of
Finance Emery Harris pleaded guilty to accounting fraud charges. Chief
Financial Officer William Owens and former CFO Weston Smith had previously
pleaded guilty. All defendants charged to date in the HealthSouth case are
cooperating in the government's investigation, which is ongoing and active.

The investigation is being conducted by the FBI-Birmingham Field Office, with
assistance from the SEC, Atlanta District-Enforcement Division. The
prosecution is being handled by U.S. Attorney Alice H. Martin and Assistant
U.S. Attorneys with the White Collar Section and Asset Forfeiture Section of
the United States Attorney's Office, with assistance from attorneys with the
Fraud Section of the Criminal Division of the Department of Justice in
Washington, D.C. The prosecution is being overseen by the President's
Corporate Fraud Task Force, headed by Deputy Attorney General Larry Thompson.